4 comments:

Thanks for all your posts, it's been a real pleasure reading them.. Definitely learnt quite a bit as well. Great blog you have going on! I'm relatively new to investing in precious metals, and would just like to find out how you plan to exit your investment in products such as Silver coins you bought from Bullion Star? It seems the spread between the buying and selling price is pretty large. For example, the price to buy Silver Eagle 1oz coins is $25.24, but you can only sell it to Bullion Star for $20.95 (indicated under 'Sell to BullionStar').

Thanks for the compliments! I'm glad my random ramblings is interesting to someone!

My physical precious metals are kept in my safe never to see the light of day! I hope I never have to sell them. I think of physical precious metals as a "put" on my "wealth".

It's important to know the "premium" involved in getting physical delivery as well as smaller denominations. That is why I like the RCM 10oz because the premium is pretty good for the capital outlay.

However, for pure capital gains I buy BullionStar's vault grams which has a much smaller premium and spread. Of course the downside is that it is "not tangible" and you can't get delivery, but it is easier to transact (both buy and sell). I have more vault grams than physical holdings.

I guess this way is similar to buying ETFs like GLD or SLV, but I find BullionStar easier than opening up a brokerage account to trade the US markets and dealing with forex and also whatever witholding taxes the US has.

There are pros and cons for both ways of investing in precious metals, so it really depends what your goals are. I use both methods because I invest in precious metals for 2 reasons - I'm a tinfoil hat wearing conspiracy theorist and I also think that precious metals offer incredible value at these prices.

FYI, I'm looking for massive capital gains before I'm even tempted to sell.

Thanks for the reply GMGH! Really insightful. I have a pretty similar profile as you; 25, graduated from a local university and studied Business as well. Big fan of Howard Marks. Also have a keen interest in personal finance, but of course too lazy to maintain a wonderful blog like yours.

Anyway, yes I was about to follow up with questions regarding Vault grams sold by BullionStar. From their website, it seems that there is currently no buy and sell fees (commissions) charged by the company for Vault Grams transactions? I suppose that makes it more attractive relative to buying ETFs like GLD and SLV that you mentioned. Also, any idea how the Vault Grams work? It's not exactly a regulated exchange or marketplace for people to buy and sell Gold or Silver. Is BullionStar's role a market maker for buying and selling VaultGrams? Also, how easy is it to set up an account to trade VaultGrams?

Lastly, is the 'safe' you mentioned the vault at BullionStar? Contemplating whether to make use of their vault, especially since they're offering free storage until the end of this year.

Both your reasons for investing in precious metals also hold true for me. Silver really does look extremely attractive at current prices. Will definitely head down to BullionStar to check out their shop this week..

BullionStar lists the selling price of their Vault Grams as well as the buy price and it is reasonable to me. I just checked, silver spread is 3% and gold spread is 1.5%. Buying and selling the physical has a much larger spread which you've already done the math in the previous comment.

From my understanding, each Vault Gram is backed by a physical holding in BullionStar's own ownership and stored in their vault. If I have 500g of silver and you have 500g of silver, they have a 1kg bar in their vault which they will not sell.

Since they created their own "market" for this, it is not regulated by any external agency. Also there is no way to check if their vault holdings have multiple claims on them, leading them to be not "physically backed", but all of this is basically counterparty risk that I am willing to assume.

I can't remember how easy it was to open an account, but I don't remember it being difficult or requiring me to go down to the store. I only visited the store months later to pick up some physical that I bought.

You should see the charges and see if the storage if suitable for you. I literally keep my gold and silver in my safe in my house. I don't have so much physical holdings, so it works out better for me to just keep them in my house and be totally and entirely free from any counterparty risks. One of the main benefits of physical precious metals is the ability to remove them from the financial system and be free of any counterparty risks, so I'm making use of that characteristic.

Perhaps I might bump into you at the store when I pick up my orders ;)

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